Sales of new cars have been moving along at record levels for the first part of 2012. But all of this hard fought progress is in danger of coming to a sudden and abrupt stop thanks to a supplier issue that threatens to disrupt and potentially cripple all global vehicle production.
The problem stems from a recent plant explosion that occurred on March 31st at a chemical plant owned by Evonik Industries AG. The German chemical firm is one of the main suppliers of Cyclododecatriene, a chemical compound that is the key ingredient of a special type of resin known as PA-12. PA-12 grade resin is used to make various automotive components including fuel lines, brake lines, and other applications. The Evonik plant is still heavily damaged, and it is unknown when production at the plant will be restored. If the firm is unable to restore production capability, it could bring about a widespread disruption in production for many aspects of the automotive industry.
“The shortage is real and immediate” said William Kozyra chairman of Auburn Hills based TI automotive in a recent letter sent out to customers that was picked up by the publication Bloomberg. In the same letter Kozyra also mentions “…the possibility of production being disrupted at some of your facilities in the next few weeks is high.”
This report is troubling news since TI is a critical supplier for several automakers here in the United States including Toyota, General Motors, Ford and Honda. There have already been several production disruptions reported as a result of the plant explosion, but the automakers are all keeping a close eye on the situation. “They’re certainly looking very hard at substitutes”, stated Michael Robinent managing director for industry consulting firm IHS Automotive. “But if there were easy substitutes then they would’ve been thought of already.”
However if the Evonik plant is unable to resume production of Cyclododecatrine soon, then things will take a bleak turn for the worst and perhaps serve as a formidable obstacle for an industry that is still recovering from the lingering effects of the 2008 recession – at the same time some analysts and even automakers are making noise about the possibility of a new-vehicle market in the US of 16 million vehicles within the next two years.